Korea Company Setup: Your Complete Guide to Starting a Business in South Korea

Since South Korea liberalized its market in the 1990s, its private sector has experienced remarkable growth. By February 2022, foreign portfolio investments accounted for more than 37% of the Korea Composite Stock Price Index (KOSPI)’s market capitalization. This highlights South Korea’s reputation as a hub for innovation, industrial development, and business-friendly policies, making it an attractive destination for foreign entrepreneurs and investors.

Choosing the Right Business Structure

Selecting an appropriate business structure is critical for optimizing operations, managing ownership, and ensuring tax compliance. Key options include:

• Subsidiary: This is a separate legal entity owned by a parent company, offering autonomy and limited liability. It is a popular choice for foreign companies entering the South Korean market.
• Private Company (Yuhan Hoesa): A limited liability company (LLC) that provides flexibility in management and taxation. Companies with foreign direct investments exceeding 100 million KRW are classified as foreign-invested under the Foreign Investment Promotion Act, though they are still governed by domestic commercial law.
• Branch Office: An extension of the parent company without independent legal status, subject to specific reporting and regulatory requirements.
• Liaison Office: Engaged in non-commercial activities such as market research and promotional efforts, this structure is regulated under the Foreign Exchange Transactions Act.

The optimal structure depends on factors such as company size, industry, and business objectives. Consulting legal and financial experts in South Korea is crucial to making informed decisions and ensuring compliance with local regulations.

Steps to Establish a Business in South Korea

1. Select a Company Name: Choose a name in Korean that is unique and approved by the Korean Intellectual Property Office (KIPO).
2. Set Up an Escrow Account and Allocate Capital: Open an escrow account and deposit the required capital to establish your financial base.
3. Prepare Internal Documents: Draft key documents such as bylaws and resolutions for company registration.
4. Obtain a Corporate Registration Certificate: This certificate officially establishes your business as a legal entity in South Korea.
5. Acquire a Corporate Seal Card: Necessary for signing official documents and conducting formal business transactions.
6. Register with the Tax Office: Complete the tax registration process by providing required company details to ensure compliance.
7. Open a Business Bank Account: Use your registration certificate and identification to open a dedicated business account.
8. Launch Business Operations: Once all requirements are met, you can officially begin operations and implement your business strategies.

Conclusion

South Korea offers tremendous opportunities for entrepreneurs and investors in its dynamic and innovative market. From choosing the right business structure to navigating regulatory requirements, understanding each step is vital for success.

At Pearson & Partners Korea, we provide expert guidance on company formation and tax accounting, ensuring a smooth market entry and sustainable growth. Visit Pearson & Partners Korea today and start building your business in South Korea’s thriving economy.